In a billion-dollar deal, AMC Theatres has acquired Carmike Cinemas to become the largest movie theater chain in the world.
The transaction is valued at approximately $1.1 billion, including the assumption of Carmike net indebtedness. AMC will acquire all of Carmike’s outstanding shares for $30 cash. The purchase price per screen is approximately $376,000, and the per share purchase price represents an approximate 19.47 percent premium to Carmike’s closing stock price on March 3.
AMC currently boasts 5,426 screens and many of the most productive theaters in the country’s top markets. Carmike has 2,954 screens, primarily located in mid-size, non-urban communities. Together, AMC and Carmike would have well over 6,000 theater locations in 45 states across the country, including Washington DC.
The transaction is expected to provide significant growth for AMC and will allow it to bring its amenities and customer service to enhance the movie-going experience. It’s also expected to result in free cash flow per share accretion, exclusive of one-time transaction-related charges, in 2017 and beyond, and is expected to produce annual cost synergies of approximately $35 million.
Other key benefits of the transaction include:
- Diversifying AMC’s footprint by adding theaters with complementary geographic and guest demographic profiles that strengthen the combined company’s admissions growth potential with limited geographic overlap;
- Expanding AMC’s proven and successful guest experience strategies to millions of new guests in complementary markets;
- Reducing related General and Administrative expenses by combining back-of-the-house functions such as accounting, finance and technology. The result is a more efficient and effective competitor through greater scale, scope and expertise. The combined company will be headquartered in Leawood, Kansas. Adam Aron will serve as Chief Executive Officer and President, and Craig Ramsey will serve as Executive Vice President and Chief Financial Officer;
- The maintenance of AMC’s quarterly dividend;
- The maintenance of AMC’s balance sheet flexibility and attractive leverage profile; and
- AMC’s receiving substantial additional value in NCM, a subsidiary of National CineMedia.
“This is a compelling transaction that brings together two great companies with complementary strengths to create substantial value for our guests and shareholders. Through this transaction we expect to unlock synergies, sufficient we believe to make this transaction accretive in 2017. AMC also gets to extend the reach of our innovative, guest-experience strategies to further transform the movie-going experience for millions of new guests. We also look forward to welcoming so many talented Carmike employees to the AMC team,” said AMC’s president/CEO Adam Aron.
“Our combination with AMC is a transformative milestone for Carmike and one that provides significant value to Carmike shareholders,” said David Passman, president/CEO of Carmike. “By joining with AMC, we are bringing together two highly complementary theatre footprints and a shared commitment to service and innovation, positioning the combined company to deliver an even more compelling movie-going experience in many more locations across the country. I am proud of the Carmike employees whose dedication and hard work have made this combination and its many benefits possible. We look forward to working together with the AMC team to complete the transaction and to ensure a seamless transition.”
“By broadening AMC’s geographic and demographic base for delivering our groundbreaking guest experience innovations in comfort and convenience — such as plush power-recliners, enhanced food and beverage, premium sight and sound, greater guest engagement and targeted programming — AMC is poised to deliver the best possible movie experience to more movie-goers than ever before,” added Aron.
The transaction was approved by both Boards of Directors of AMC and Carmike, respectively. It is expected to be completed by the end of 2016, subject to customary closing conditions, including regulatory approval and approval by Carmike’s shareholders.
The transaction, which has fully committed financing in place, will be funded through a combination of existing liquidity, including cash on hand, and incremental debt. The debt financing commitment is being provided by Citigroup Global Markets.
Citi is serving as exclusive financial advisor to AMC and Husch Blackwell is serving as AMC’s lead legal advisor. J.P. Morgan Securities is serving as exclusive financial advisor and provided a fairness opinion to Carmike. King & Spalding is acting as legal counsel to Carmike.